Week 5 Homework, Ch 14-17

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Week 5 Homework, Ch 14-17

Multiple choice (5 pts each) (highlight or clearly mark your answer)

1. 1.     Significant interest investments must be accounted for using the:
   1. a.     equity method.
   2. b.     consolidation method.
   3. c.     discounted cash flow method.
   4. d.     acquisition method.

1. 2.     Which of the following is a condition to record an investment as an available-for-sale security?
   1. a.     There should not be any annual cash flows from the investment.
   2. b.     It should have a maturity of less than two years.
   3. c.     It should be a debt security.
   4. d.     The ownership in the voting stock of the investee should be less than 20%.
2. 3.     When the market rate of interest on the date bonds are issued is higher than the face rate of interest on the bonds: 
   1. a.     The proceeds from the issuance of the bonds will be greater than the face value of the bonds
   2. b.     The bonds are issued at a premium
   3. c.     The bonds are issued at a discount
   4. d.     Both a and c are correct
3. 4.     A business's cash receipts and cash payments for a specific period are reported on a(n):
   1. a.     income statement.
   2. b.     balance sheet.
   3. c.     cash flow statement.
   4. d.     cash reconciliation statement

1. 5.     Preferred shareholders:
   1. a.     are guaranteed that they will not take a loss on their investment.
   2. b.     have higher voting rights than common shareholders.
   3. c.     are sold for a price lower than that of common stock.
   4. d.     have the first claim on dividend funds.

1. 6.     Which of the following statements is true of the direct and indirect methods of preparing the statement of cash flows?
   1. a.     The indirect method and the direct method will produce the same amount of net cash flow from operating activities.
   2. b.     The direct method begins with Net Income and adjusts to calculate operating and investing cash flows.
   3. c.     The indirect method shows three types of cash flows, but the direct method does not.
   4. d.     The operating activities section of both the direct and the indirect methods are the same.